The rapid growth of digital media in recent years and the simultaneous pressures on traditional media have led to a number of fascinating media transactions in which the Competition Bureau has had to confront the difficult question of product market definition in industries characterized by disruptive technological change.
In March 2015, the Bureau cleared a magazine publishing transaction (TVA Group's acquisition of Transcontinental's magazine business) due, in its words, to the "presence of effective remaining competitors in all overlapping genres of magazines and the ability of advertisers to reach the same demographics through other magazines and media" (emphasis added). The Bureau also stated that it considered the "general decline in readership of magazines, in part attributable to the increasing importance of the Internet as an alternative for readers" (emphasis added).
The precedential significance of these references to other media and the Internet is not entirely clear. That said, these references cannot be accidental, and it is therefore possible that something of a shift in the Bureau's analytical framework for media mergers may be underway.
By way of context, historically, and consistent with competition authorities in other leading jurisdictions, the Canadian Competition Bureau has approached product market definition in the advertising and media industries on the basis that each different type of media (e.g., radio, television, newspapers, flyers, out-of-home, etc.) constitutes a separate market. Divestitures of radio stations, television channels and newspapers have been required precisely on this basis.
For its part, and although contested merger jurisprudence in Canada is extremely rare, the Competition Tribunal, in 1992, supported an even narrower product market definition than had been proposed by the Bureau in the only fully litigated media merger in Canada, the Southam case, finding that daily newspapers and community newspapers were not in the same product market. In relation to nascent electronic media, the Tribunal wrote:
Some 22 years later, in June 2014, the Bureau reached a remarkably similar conclusion in its analysis of Transcontinental's acquisition of Quebecor Media's community newspapers in Quebec:
A few months later, however, the Bureau approved the divestiture of numerous of these community newspapers to a buyer who only offers online advertising services and would not continue to publish printed editions of the newspapers, on the basis that no other interested buyer existed for the newspapers in question. While it is debatable whether this divestiture amounted to a true competition law remedy within the traditional meaning of that phrase (because how could a purchaser who does not compete in the relevant market remedy a substantial lessening of competition in that relevant market), the obvious interest of this buyer, and its approval by the Bureau, puts into doubt, at the very least to some degree, the strength of the original conclusion regarding market definition.
The outcome of the Transcontinental / QMI newspaper transaction, together with the conclusions reached during the TVA / Transcontinental magazine transaction, may turn out to represent an important chapter in the Bureau's evolving review of media mergers. The next media transaction on the Bureau's docket is Postmedia's proposed acquisition of Sun Media's English-language daily newspaper business. The Bureau's pronouncements on market definition and the role of the Internet in that transaction will be eagerly anticipated.
Stikeman Elliott LLP was counsel to Transcontinental on both transactions referred to herein.
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